1. Why does Allen state that the whole tomato production is limited to 800,000 pounds? (i.e. where does the number 800,000 come from?)
Allen states that the whole tomato production is limited to 800,000 pounds because according to exhibit 1, the forecasted demand for whole tomato production is 800,000 pounds. Thus, the whole tomato production is limited to 800,000 pounds despite the ample production capacity. To further explore this statement, it must be noted that whole tomato uses only crop scoring 8 and above (Grade A, and the best of Grade B Crop). Therefore, weighted average in whole tomato production from Grade A and Grade B must equal 8. All of Grade A (600,000 pounds) will be used, and X will be used to represent the amount of Grade B used. (600,000*9+x*5)/(600,000+x)=8 x=200,000
In order to achieve the minimum average quality of the whole tomatoes, we need at least 3 pounds A with one pound B. Since we have in total 600,000 pounds grade A tomatoes, we can match 200,000 grade B with them. So we get at most 800,000 pounds whole tomatoes.
2. What is wrong with Haneda‟s suggestion to use the entire crop for whole tomatoes?
Based on the reading, Haneda’s suggestion to use the entire crop for whole tomatoes is wrong because it only accounts for quantity instead of both quantity and quality. Whole tomatoes use both Crop A and Crop B, and he assigns one price for the tomato rather differentiating based on quality. In his analysis, he calculates contribution wrong, and therefore net profit is wrong.
If we allocate some of crop of the production to juice, which requires a minimum average of6 points, it could be profitable to mix Grade A and B in the process of production.
3. How does Reynoso reach the conclusion that the company should use 2,000,000 pounds of grade “B‟ tomatoes for paste and the rest of the grade “B‟ and grade „A” tomatoes to produce juice? What is wrong with Reynoso‟s reasoning?
Exhibit 1 shows the demand forecasts for...
Please join StudyMode to read the full document